Wednesday, August 11, 2004

Yes, it certainly looks like the honeymoon is over as The Fed decided to bump up interest rates today. If you haven't done so already, jump into the borrowing game now to get that new home or car or whatever before The Fed strikes again. Who knows when money will be this cheap again. Carpe diem!

The Wall Street Journal Prime Rate went up by 0.25 percentage points, and is now 4.50%. The Target Federal Funds Rate went up to 1.50%. Notes from The Fed* below:

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 1-1/2 percent.

The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. In recent months, output growth has moderated and the pace of improvement in labor market conditions has slowed. This softness likely owes importantly to the substantial rise in energy prices. The economy nevertheless appears poised to resume a stronger pace of expansion going forward. Inflation has been somewhat elevated this year, though a portion of the rise in prices seems to reflect transitory factors.

The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters are roughly equal. With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

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